The FRBNY's William Dudley isn't concerned about the post-election jump in rates at the long end of the curve, and says the Fed is about to start following suit at the short end.

Even the dovish Charles Evans from the Chicago Fed admits inflation is getting closer to the central bank's target, and the labor market is close to full employment.

The 10-year Treasury yield had moved as high as 2.45%, but has pulled back to 2.40%, still up 1.5 basis points on the session.

On the regulatory front, Fed Governor Daniel Tarullo on Friday set himself up as the chief defender of the current bank regulatory regime, but whether his voice will be heard is a different story given the incoming administration, which looks to be staffed with those favoring a far lighter regulatory hand.

More confidence that rates are rising for real this time, "wide-sweeping" regulatory changes to come, and a better FICC environment have analyst Brian Kleinhanzi upgrading Bank of America (BAC) and Goldman Sachs (GS+0.9%) to Outperform from Market Perform.

Kleinhanzi keeps JPMorgan (JPM+0.8%) and Bank of New York (BK+0.2%) at Outperform.

Turning to regional banks, KBW boosts its estimates for 2017 and 2018 for the large players, and upgrades Citizens Financial (CFG+1.9%) and Comerica (CMA+1.6%) to Outperform, while downgrading KeyCorp (KEY+0.3%) and PNC (PNC-0.2%) to Market Perform. The switch comes as KBW turns its focus on those lenders best positioned for a rising rate environment, and from regulatory relief, not to mention other levers should rates not rise.

In a recent screen he developed, he looked for companies that had no dividend cuts in each of the past five completed fiscal years, and filetered for stocks with yields higher than that of the S&P 500 (~2.2%); payout ratios below the market's 50.4% level; FCF yields that exceed their dividend yields; and one-year dividend-per-share growth better than the S&P 500's median of 7.7%.

JPMorgan and Citigroup both easily topped estimates thanks to a big rebound in previously-in-the-doldrums markets revenue. JPM is higher by 1%, and Citi by 2%. The read-through is pushing Goldman Sachs (GS+3%), Morgan Stanley (MS+2.7%) and Bank of America (BAC+2.4%) all nicely higher.

Less capital-markets focused, Wells Fargo also beat forecasts, but not as soundly. As usual of late, it's lagging its TBTF peers, up just 0.3%.

A Bloomberg report says the ECB is likely to gradually wind down bond purchases ahead of the scheduled March 2017 end of its QE program. The central bank is currently buying €80B per month of government and corporate paper, and may begin to slow that amount by €10B per month, according to the story.

Yields are higher in Europe and the U.S., with the 10-year U.S. Treasury up five basis points to 1.675% and the German 10-year Bund yield is up four bps to -0.048%. TLT-1.1%, TBT+2.2%

Though the Dow and S&P 500 are each lower by 0.5%, the yield-starved XLF is up 0.6%, with Bank of America (BAC+2.1%), Citigroup (C+1.9%), and JPMorgan (JPM+0.4%) leading the way. Shrouded in scandal, Wells Fargo (WFC-0.2%) continues to underperform.

"Large banks are going to be forced to take on more capital," says Dick Bove. "It will make the cost of funding more, not less, expensive. It will reduce the appeal for investors to put money at risk in the banking system."

Bove is commenting on a weekend announcement from Fed Governor Daniel Tarullo promising future stress tests will be geared to demanding even higher cash buffers for banks. Set to take effect next year, the new rule could raise capital requirements for the largest banks by 3 or 4 percentage points, writes Jeff Cox at CNBC.

There's good news though, as those lenders with less than $250B in assets won't be subject to the same standards. FBR's Edward Mills calls it a "significant positive" for regionals, which now have more certainly on the process, reduced regulatory expenses, and thus the ability to return more capital to owners.